question for owner operators

Electing to be taxed as an S corp does cost significantly more than running as a Sole Prop or just a regular disregarded entity single member LLC. I'm currently working on going back to a Sole Prop because the S corp cost about $2,000 a year between $1,000 for corporate tax return and $250 a quarter for payroll. It can pay for itself if you have a taxable income of 70k+ in the 15% Self employment tax savings beyond a reasonable salary, but I can write off enough of my income into my Solo 401k and HSA that It cost me more than it's worth it anymore as I'm not working near as hard as I used to.

 

I never paid as much to a tax preparer.

 

I would like to revive this S corp dilemma, I too have said question, but I would like to add that I want to move to a 0 income tax state, seeing as this is an added benefit, would I see a greater return on my S corp status?

 

Ideally, I would like to funnel most of the money my way and keep the rest in the business account untouched, for future business expenses. as long as I dont withdraw it from the company it doesn't get taxed, until end of year and I can do things to bring down the taxable income right? Like buy a new truck?

 

I'm not a CPA and my advice is worth what you paid for it, but that said having an S Corp in a income tax free state is no additional advantage as all the S Corp does is save you on self employment tax (15%) on distributions paid after a reasonable salary to you ($40,000). So if you make 70k taxable you save 30k * .15 = $4,500. However the S Corp tax return cost 1-2k and payroll will be around 250 a quarter so now you've gone through all this BS just to save $1500 which is why I'm currently going back to a sole proprietorship from an S Corp. If you're working hard and bringing in 100-200k taxable it's probably worth it, but I'm not that motivated anymore.

As far as keeping the money in the S Corp account and not paying taxes on until the end of the year. You need to have payroll set up if you're working under the S Corp and be paying payroll taxes as you go. You can wait until tax time to pay the rest of the taxes, but you might owe a 6% penalty.

 

I regret starting as an llc instead of just a sole proprietorship. It's just an added expense that provides little benefit for a one man operation. If my goal was to expand, then an llc would have more benefits.

 

You need to figure where you want to move or what you want to do and you have to have an account and figure all this stuff out.

It's very simple to start an LLC and run it and it is a separate entity from you, and it does help you to offset taxes in certain ways, especially self-employment tax.

But the accountant is going to tell you how to set yourself up, and if you should pay yourself a certain salary and he can explain to you the tax advantages in each scenario.

But you have to have a good account that is a trucking accountant, not a regular accountant, because there are outrageous tax benefits to having a trucking company if it's set up properly.

There's so much expense in this business, and IRS has so many provisions for it, but you need an accountant that can sort this out for you and give you the exact answers that you need.

 

If you are leasing to him running under his authority and insurance then he should provide the IFTA sticker. Tags I can see you providing. I'd start the LLC and you need to get an EIN. Personally I'd run from him.

 

You don’t need a LLC to get an ein

 

No one said he did. He will need an EIN sooner or later get everything done conrectly in a timely manner and things will probably go smoother.